NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A030200010109-5
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: December 20, 2016
• Document Release Date: July 31, 2006
• Sequence Number: 109
• Publication Date: August 6, 1977
• Content Type: REPORT

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National Intelligence Daily Cable for 6 August 1977, Saturday
e NID cable is tor the purpose o informing
senior US officials.
RHODESIA: Situation Report
ETHIOPIA: Mengistu on US Relations
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Page
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JAPAN: Defense White Paper
CHINA: Industrial Revival Falls Short'of
Expectations
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Page 8
CANADA: Possible Increase in Gas Exports
INTERNATIONAL: Sugar Conference
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Page 12
State Dept. review completed
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RHODESIA: Situation Report
which was established in early July by 12 members of parliament
who defected from Smith's Rhodesian Front Party, is contesting
46 of the remaining 49 white seats in the assembly. The National
Unifying Force, a coalition of small liberal parties, is con-
testing 16. Only three of the eight black seats open to direct
election are being contested.
opposea in the election. The opposition Rhodesian Action Party,
On the Rhodesian political scene, Smith is running un-
The opposition party is attempting to convince voters
that Smith is too weak to produce a settlement and that quick,
decisive action--including military action--is needed to resolve
the present impasse. Most Rhodesian whites, however, apparently
want to avoid a broadening of the war. The opposition will seize
on any significant effort by the guerrillas to disrupt the elec-
tion as justifying ruthless persecution of the war in hopes of
causing a substantial swing in votes in its favor.
It is too early to predict the outcome of the election;
mit nee s a two-thirds majority in the assembly to win ap-
proval for any settlement proposals.
I I
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ETHIOPIA: Mengistu on US Relations
//Chairman Mengistu of Ethiopia's ruling miZi-
tary council called in the US charge on Thursday for a long
discussion on US-Ethiopian relations, including his displeasure
over the US decision to supply arms to Somalia. He made his
points in a more restrained manner than in previous discussions
and expressed a desire to improve bilateral relations.//
//Mengistu referred to the close economic and
defense cooperation between the US and the previous Ethiopian
government. He complained that the US had not taken foreign
threats to Ethiopia's security seriously, held up arms deliv-
eries, misunderstood Ethiopia's revolution, and now is provid-
ing moral and material support to a country that is committing
aggression against Ethiopia.//
//No longer able to rely on the US for arms,
Mengistu claimed that Ethiopia was forced to seek assistance
elsewhere, but he said this did not mean that Ethiopia was any-
body's puppet.//
//The Ethiopian leader made no new demands dur-
ing the-meeting, and voiced his intention to improve bilateral
relations, even suggesting he might soon appoint an ambassador
to Washington. He asked the US charge to convey to President
Carter his appreciation for the President's expressed desire to
improve relations. As an indication that the door is open for
further dialogue, Ethiopian media have omitted charges against
the US--including criticism of the arms supply decision to
Somalia--for the past several days.
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A US delegation met with Colombian President Lopez
in Bogota Last month to discuss the problem of narcotics-
related corruption among Colombian government officials. The
meeting--which was preceded by a series of discussions, brief-
ings, and media coverage of drug trafficking in Colombia--is
another stage in joint US-Colombian drug control efforts. Po-
litical constraints, however, probably will Limit Lopez' ef-
fectiveness in dealing with the drug problem.
Lopez, who is deeply concerned about the narcotics
problem, was receptive to an offer by President Carter to pro-
vide evidence on corruption among Colombian officials charged
with enforcing narcotics regulations. He was very candid dur-
ing the meeting. After hearing information implicating various
high-level officials in the judiciary, the military, and law-
enforcement agencies, Lopez said he planned to set up an elite
civilian law-enforcement unit to cope with crime and corruption.
I Lopez outlined some of his plans for reforming Colom-
ia s judicial system. He explained that he had in mind adopt-
ing US procedures in which attorneys, rather than judges, in-
vestigate and prosecute cases. Lopez also pledged that the
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drug problem would have priority during his final year in of-
fice, and he said he is considering stationing a narcotics
liaison officer in Miami to work with the US Drug Enforcement
Administration.
I Lopez' commitment to improve narcotics enforcement
may tacilitate certain bilateral drug-control efforts, but a
direct assault on the problem of corruption, particularly at
higher levels, is unlikely. Lopez has just weathered a serious
scandal that threatened his political position, and he may be
reluctant to risk another public outcry by focusing attention
on corrupt officials.
Lopez' ability to address the drug issue is further
circumscribed by his prospective "lame duck" status after the
primary election slated for next February. As his authority
diminishes, he may not be able to pursue many of his plans on
narcotics control. Even in mid-term, when his political strength
was presumably at its peak, Lopez seemed unable to deal effec-
tively with a number of pressing problems.
The problem of corruption, perhaps the main impedi-
ment to efforts to resolve Colombia's other ills, is not likely
to be seriously addressed, much less solved, during Lopez'
final months in office. At best, Lopez may be able to set some
machinery in motion that will be continued by his successor.
Iceland is stepping up its campaign to obtain com-
pensation for the US-manned NATO base at Keflavik. Icelandic
Foreign Affairs Undersecretary HeZgason recently told a US of-
ficial that six of eight cabinet members now favor pressing
the US for a cash contribution to cover its use of the Keflavik
facility.
//Prime Minister Hallgrimsson could be under grow-
Inc pre sure from both his cabinet and party to adopt a harder
line on base policy in anticipation of the election next year.
The timing of Helgason's comments, however, suggests that Ice-
land is staking out its bargaining position well in advance of
meetings with the US, which are scheduled later this year.//
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The recent US rejection of an Icelandic request for
financial assistance to construct a civilian air terminal at
Keflavik reportedly has made it more difficult for Hallgrimsson
to resist demands for US payments. Funding for the air terminal
and further separation of civilian and military facilities on
the base will be major issues when Foreign Minister Agustsson
comes to the US in September.
//The US base at Keflavik has been the only sig-
ns ican oreign policy issue in Iceland since the "Cod War"
with the UK. Most Icelanders favor retaining the facility, but
they do not agree on what the terms of continued US and NATO
presence should be. With Iceland's economic problems mounting,
demands for heavier US participation in base improvements and
other financial assistance have gained popularity.//
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JAPAN: Defense White Paper
//Japan's latest Defense White Paper issued on
July 29 reflects Japan's concern with the growing Soviet air
and naval threat. It provides a preview of the government's
priorities for defense spending for next year.//
//The report notes that Soviet military power has
expanded over the past decade, and it specifically refers to
the threat posed by Soviet submarines. The paper predictably
reiterates Japan's interest in maintaining stability on the
Korean peninsula and acknowledges Japan's support for US plans
to withdraw its ground forces from South Korea.//
//The paper outlines the Defense Agency's fiscal
year 1978 budget requests, which will be debated this fall.
Military planners recommend the long-postponed acquisition of
an antisubmarine patrol. aircraft, presumably the Lockheed P-3C,
and the purchase of the first group of F-15 interceptors.//
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I //The penetration of Japan's air defenses by a So-
viet MIG-25 last September is cited to underscore the need to
improve Japan's early warning capability, buth the paper does
not recommend procurement of an airborne early warning system
this year. Defense expenditures during 1978 are to remain at
approximately the same percentage of GNP as this year.
CHINA: Industrial Revival Falls Short of Expectations
I IDuring the first half of 1977, China's industry
has made a respectable recovery from last year's poor perform-
ance but has fallen short of Peking's expectations. A critical
factor in achieving a more rapid recovery will be the ability
of the central government to restore worker discipline and elicit
greater effort from its labor force. Teng Hsiao-ping's return to
power may help accomplish this task; he is regarded as a strong
administrator who advocates programs favorable to the workers.
Unless the central government makes good its promise to increase
wages, however, Chinese labor is likely to be only temporarily
pacified by Teng's return.
I IEarlier this year, the Chinese media released a
torrent o statistics suggesting a rapid revival of industry,
particularly in those provinces and cities hard hit by the po-
litical turmoil of last year. Mid-year reports, however, have
been scant and notably lacking in statistics. The latest round-
up merely noted that industrial production from January through
June was "above" the same period in 1976.
//Peking for the most part has relied on inter-
provincia and inter-enterprise emulation campaigns and on strong
negative measures such as sevFre sanctions aaainst absenteeism
to promote economic recovery.
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I lIt is perhaps more than a coincidence that the announce-
ment of Teng's return to power occurs at a time when Peking has
apparently decided to try a more positive approach toward labor.
China's leaders seem to have recognized the need for a strong
administrator to bring greater unity and a more forceful approach
to solving the problems of the economy.
I IBy itself, Teng's return is likely to pacify labor
only temporarily. The central government, however, will be
elled to follow through on its promise to increase wages.
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CANADA: Possible Increase in Gas Exports
//The Canadian National Energy Board will consider
favorably requests by domestic producers to increase gas ex-
ports to the US. This position is contained in the NEB report
issued last month that supported the construction of the AZcan
pipeline. It is a reversal of the Board's previous stand and
reflects he much improved prospect for gas supplies in Alberta.//
//The NEB envisions two ways to take advantage of
Alberta's current gas surplus. The first option calls for gas
exports to be increased over the next several years but offset
against shipments scheduled after 1984 under existing long-term
contracts.//
//The NEB sees several advantages in this option.
US customers would receive Canadian gas at a critical time, be-
fore Alaskan North Slope gas reaches the domestic market. The
additional exports would earn revenue for Canadian producers
and induce new exploration and development. Canadian consumers
would benefit because of reduced export commitments after 1984,
when the Board forecasts a domestic shortfall.//
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//The second option is basically a "loan" arrange-
ment. It involves increasing exports now on the understanding
that the gas would be repaid with Alaskan gas at a later date.//
I //The NEB, however, notes an obstacle to boosting
exports--the lack of pipeline capacity. Addressing this prob-
lem, it suggests building new pipelines in Alberta and
Saskatchewan to connect with a future pipeline moving Alaskan
and Mackenzie Delta gas south.//
I //The NEB's willingness to consider export in-
creases reflects the sharply improved gas supply picture in
Alberta, the leading gas-producing province. The surplus has
emerged during the last two years because of increased drilling
and slower-than-anticipated growth in domestic demand. Higher
domestic and export gas prices and improved return to producers
prompted the sharp rise in gas drilling.//
//All interested parties--the NEB, Ottawa, gas
firms, and Alberta officials--agree there is a gas surplus, but
its size is a matter of debate. Provincial officials have an
optimistic view largely because they are being pressed by pro-
ducers, many of them independent, to find market outlets for
new supplies. The NEB, however, takes a conservative view. It
estimates the surplus at about 420 billion cubic feet annually
this year and next, declining to 300 billion cubic feet annually
in 1979 and 1980, and disappearing by 1985.//
//An increase in gas exports would reverse the de-
cline in Shipments of the last few years. After peaking in 1973
at 1 trillion cubic feet, exports fell to 959 billion cubic feet
in 1974 and stabilized at 950 billion cubic feet in 1975 and
1976. The drop reflected production problems in the British
Columbia gas fields that supply the US Pacific Northwest. This
year, exports will probably increase, perhaps to 980 billion
cubic feet, because of emergency exports early in the year to
meet abnormal demand caused by the severe winter in the US.//
//As yet Ottawa has not indicated that it will sup-
port the NEB's recommendation on exports. Energy Minister
Gillespie recently suggested that it might be premature to spec-
ulate on a boost in exports before the matter is discussed by
the government as part of the debate on an Arctic gas pipeline.//
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//Cabinet deliberations on whether and how to
offer pipe i.ne negotiations to the US will start today and are
expected to result in a decision by Monday after preliminary
consultations with the US.//
//Several companies, however, are already reacting
to the NEB's suggestion. Northwest Energy, a US pipeline com-
pany and a participant in the Alcan consortium, has signed a
five-year contract with Pan-Alberta Gas for part of the surplus
with deliveries beginning in 1979. Pan-Alberta also wants to
extend the domestic pipeline system, which ends at Montreal,
eastward to supply the Maritime provinces and perhaps the north-
eastern US.//
//Trans-Canada Pipelines Ltd., which now transports
Alberta gas to consumers in eastern Canada and the US, is moving
ahead with plans to increase exports to the US if Ottawa gives
the go-ahead.//
//Ottawa stands to gain in several areas if it
with the NEB recommendation. Approval would improve
relations between the federal government and Alberta and could
open the way for further cooperation on other energy matters.
Ottawa would have more time in deciding when and how to tap
Mackenzie Delta reserves for domestic markets, and an increase
in gas shipments would help Canada's overall export picture.//
//A favorable decision by Ottawa may also win the
government of Prime Minister Trudeau some political points in
Alberta. With national elections scheduled within the next two
years, the Trudeau government is well aware that it has little
political strength in Alberta and other western provinces.
INTERNATIONAL: Sugar Conference
I he UN Sugar Conference will reconvene in September
as the result of last week's meeting in London of 20 leading
sugar importing and exporting countries. Chances for reaching
a new sugar agreement now appear much improved, although sev-
eral major issues remain to be negotiated.
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sugar stocks and stock financing, the major stumbling blocks
in earlier negotiations. Exporters have agreed to accept re-
serve stocks of at least 2.5 million tons with the exact level
still to be decided.
issues of minimum prices, special trade arrangements, quota
allocation among exporters, and access to developed country
markets remain to be resolved. Based on last week's consensus,
minimum sugar prices in a new agreement probably will be 10 to
13 cents per pound; the current world price is about 8 cents a
pound.
The London talks led to agreement in principle on
Despite the progress achieved at the meeting, the
I The trade arrangement issue may prove to be the most
difficult. It centers largely on Cuba's exports to other com-
munist countries, an issue on which Havana has previously been
uncooperative. Cuba exports sugar to the USSR, Eastern Europe,
and China under a mixture of barter and hard-currency arrange-
ments, and these countries are generally free to re-export the
sugar on world markets. The Cuban position on other matters at
the London talks, however, was surprisingly constructive.
Sugar exporters probably are anxious to reach an
agreement because of the current low sugar prices and because
Congress is considering a bill that could impose restrictions
on sugar imports if a satisfactory agreement is not concluded.
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